The Metaverse Gets More Crowded as Microsoft, Sony Buy Their Way in
In the world of traditional real estate investing, there is a longstanding axiom that value is determined by three critical factors: Location, location, location.
Similarly, it might be said that value in The Metaverse is a function of its own important factors: Perception, perception, perception.
And for several behemoths in the consumer technology and entertainment industries that axiom recently translated into the expenditure of billions of real-world dollars for virtual world real estate.
First, Microsoft recently announced it had agreed to buy software developer and publisher Activision Blizzard for roughly $68.7 billion, the equivalent of about $95 a share, making it Microsoft's biggest acquisition to date. Once closed, the deal will make the company the world's third largest in gaming by revenue.
Its acquisition target, Activision Blizzard, is one of the biggest video and publishers in the game and is probably best known for the Call of Duty videogame franchise which has been one of the top selling video games in the US for years now. Microsoft will also be acquiring Blizzard Entertainment, which has developed its own share of popular online and mobile games, including Overwatch, Diablo, World of Warcraft, and Candy Crush.
According to its official press release, the gaming and software developer read: "Today, Microsoft Corp. announced plans to acquire Activision Blizzard Inc., a leader in game development and interactive entertainment content publisher. This acquisition will accelerate the growth in Microsoft’s gaming business across mobile, PC, console and cloud and will provide building blocks for the metaverse."
Microsoft expects the deal to be completed in the 2023 financial year, but until then Activision-Blizzard will continue to operate as normal, the boards of directors of both companies having already approved the transaction.
Then, shortly after the Microsoft announcement, Sony Interactive Entertainment announced that it would be spending $3.6 billion to buy Bungie Inc., an independent game publisher based in Bellevue, Washington. Bungie makes the popular game franchise Destiny and was the original developer of Xbox-owned Halo.
Interestingly, Microsoft purchased Bungie in 2000, but later spun off the game studio in 2007 while retaining intellectual property rights to the Halo franchise. Since then, Halo has been one of Microsoft’s best-selling games and, indeed, one of the bestselling videogame franchises of all time. It has even spawned its own TV series which is set to release on Paramount+ later this year.
Bungie was founded in Chicago in 1991 and developed its first hit games, including Myth and Marathon, for personal computers. It now employs about 900 people and is based not far from Microsoft's headquarters in Redmond, Washington. Sony's video game division is based in San Mateo, California.
Why It Matters. Obviously, these gargantuan purchases are seen as short cuts for companies like Microsoft and Sony to enhance their already sizable entertainment portfolios through the acquisition of companies and titles that have proven staying power. And, on the most obvious level, it represents competition for videogamers themselves through new game titles for their competing gaming platforms: Sony makes PlayStation game consoles while Microsoft makes Xbox consoles.
Always in search of an economic advantage, these companies also see the need to stake out claims to virtual territory in what has become known as The Metaverse. Microsoft CEO Satya Nadella has acknowledged this motivation when he said that the Activision Blizzard deal will help the company as it expands more into The Metaverse.
For those unfamiliar with The Metaverse it is not exactly The Matrix or, at least, not yet. But it is a virtual universe that mixes different elements like social media and augmented reality and virtual reality and, according to many companies moving into the space, it is likely to be powered by cryptocurrency and non-fungible tokens. And whether or not they are right, the true believers (sorry, Stan) will point to these megadeals as proof that they are not alone in their belief.